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Softening the blows; lay-offs with a conscience.

The outlook for 1992 is as bleak as it was last year, with few signs of economic recovery. One of the most difficult decisions any employer faces, is the lay-off of staff. In view of the financial and emotional costs of lay-offs, alternative strategies should be examined thoroughly.

If lay-offs are necessary, methods can be used to minimize the negative impact. While these techniques may seem self-evident, they can be incredibly important to the recovery of those laid-off and the ultimate health of the firm.

Laid-off employees must be treated with respect and compassion. He or she will remember for a long time how the situation was handled, and will probably tell others. If a firm is over-staffed for the current work, consider other business opportunities which might bring in work. If you can avoid layoffs, you will not only save valued employees, but will likely help cover overhead costs.

Previously unattractive business propositions may merit another look, which is not to say lay-offs should be avoided at all costs. Clearly, there is a strong obligation to keep your business healthy so owners and remaining employees have a reasonable prospect of maintaining their livelihood.

You may be able to trim your payroll by work sharing. The work of four people, for example, could be shared with a fifth employee. Instead of a standard 40-hour work week, five employees would each work 32 hours, costing the company roughly the same as four people working 40 hours each.

The two potential problems with this situation are that some employees will resent having their income decreased by 20 per cent and there are some jobs which are impractical to share.

An important advantage to work sharing is that Employment and Immigration Canada offers financial incentives. To find out if you are eligible and for further details, call the Employment Adjustment Program at (416) 224-4684.

Another way to avoid lay-offs is to check your network of contacts to see if you can share the services of one of your employees with another firm. For example, while you may want to decrease the number of work hours of someone, another firm may need a little extra help but may not be willing to hire a full-time worker. The solution may be to share one employee. While it is true that the skills required and type of work being done must be similar, the result could save you a valuable employee.

If there is a chance you may be able to bring your employee back full time in future, arrange an employment contract with the other company, which gives you the first option to recall and which clearly defines each firm's obligations in a variety of contingency situations.

If lay-offs are necessary, managing, organizing and implementing them is critical to those involved, the remaining employees, and the future of the firm.

Determine how remaining staff will get the work done. Look at how lay-offs might affect your ability to grow when your business is in a better position.

For example, if you hire three third-year engineering students from the same co-op program every term for several years and then suddenly lay off the current crop, there is likely to be a high cost in replacing this source of skilled staff in future. When lay-offs are made, they should be made once. The entire firm should be reviewed. The department-by-department or month-by-month approach to lay-offs will not only consume a great deal of the owner/manager's time, but will destroy employee morale and cause more employees to leave.

There are a myriad of legal considerations to consider, which vary by industry, size and annual payroll of the firm, and by any collective and/or individual contracts under which the firm and the employees are bound.

It is advisable to contact a lawyer specializing in employment law to make sure your obligations are covered. Determine any payments and notification periods to be met. To avoid potentially time-consuming litigation, document all terminations and consider extending these periods, increasing separation payments and any other payments and benefit extensions which you are offering.

You should also consider extending your severance package to include help in making the transition and job search easier for affected employees. This can range from hiring an out-placement consultant prior to the lay-off, to simply providing reference letters. Build as many positive steps into your procedures as you can.

In implementing a lay-off, it is critical to manage the communication of the message. Persons consulted in the decision-making process must maintain confidentiality. Immediately following the lay-off, remaining employees should be given an honest and complete explanation of why lay-offs were necessary and who was affected.

Explain that staffing of the entire firm has been examined. You do not want your remaining employees looking over their shoulder for the next three months wondering if they are next. Since you will have looked at every area of the firm, questions relating to where remaining individuals and sections of the firm stand should be easily answerable.

Answer questions but do not comment on individual employees. The communications link between former and current employees are very strong and comments relating to the reason for an individual being laid off are potential liabilities and may prompt legal action.

The decision as to whether employees remain at work after receiving notice is a difficult one. It depends on the type of business and the specific positions of the affected persons.

For example, if it is a business with a great many security concerns, you may have to give notice and have the person leave the same day. For other firms, employees may continue working for a period of time after notice has been given. Try to be as consistent as possible.

By protecting the employee financially, emotionally and physically, you protect the firm. The smallest things to ease the transition can make all the difference to you and your former employee. Considerations may well include providing transportation home for the employee affected by a lay-off on the day he or she receives notice, providing someone with a sympathetic ear to speak to in the period after notice is given, and an opportunity for these employees to say good-bye to their co-workers.

Remember, you are not only eliminating an employee's source of income, you are removing the single largest activity in his or her life. You are altering self-perceptions, perceptions by others, and, consequently, an entire social network. By minimizing these changes, you minimize your legal liabilities, the difficulties for your former and remaining employees, and the chances of lasting damage to your firm's reputation. Lay-offs are never pleasant, but with the continuing rise in unemployment in Canada, they are, unfortunately, probable for a growing number of companies.

For more information on dealing with employees, please call Alex Gallacher, at 416-391-3100 (ext. 203)

Alex Gallacher is a Manager in the Human Resources Department of Mintz & Partners, a Toronto-based firm of chartered accountants.
COPYRIGHT 1992 Canadian Institute of Management
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Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Author:Gallacher, Alex
Publication:Canadian Manager
Date:Dec 22, 1992
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